This reliable predictor of US job growth just flipped negative

"There's a long history of using credit market measures as leading indicators of economic activity," UBS's Sam Coffin said. "Some of that relationship may be causal; some may not. For example, easier bank lending standards may lead faster lending and expanding activity. Or easier bank lending standards may reflect an improving economic outlook that also affects firms' hiring decisions. Whatever the causality, we have found that changes in bank lending standards and changes in investment-grade spreads tend to lead employment growth. "

"Among the modest number of banks that indicated they had changed their [commercial and industrial] lending standards, reports of tightening were more frequent, especially for large and middle-market borrowers," the Fed said. "The domestic respondents that tightened either standards or terms on C&I loans over the past three months cited a less-favorable or more-uncertain economic outlook as well as worsening of industry- specific problems as important reasons."

This is the first such tightening since 2012, and the second time it's happened since the recession ended in June 2009.

The message was similar in the survey respondents' assessment of commercial real estate (CRE) loans.

"The modest net tightening in C&I and CRE lending, if continued, would point to an end to the multi-year easing in standards," Barclays' Michael Gapen said.

A net 6% reported tightening standards for C&I loans for large and middle-sized firms. Federal Reserve

Before we go out into freak-out mode, it's important to recognize that it was only a "modest" number of banks that were tightening standards. Furthermore, survey respondents reported "having reduced costs of credit lines and narrowed loan spreads for both large and middle-market firms and smaller firms on net."